4 Conclusions on What It Takes to Be a Successful Next Generation Financial Advisor

Over the course of the years that I have been with SEI, I’ve worked with hundreds of advisors. And from those consulting and working sessions with many advisors just like you, I compiled what I consider to be four meaningful conclusions on what it takes to be a successful “next generation financial advisor.” That is, an advisor that’s able to sustain and maintain a growing business as our ever-changing industry faces the next generation of advisors and investors. None of the insights that I’m about to share with you today are my own thinking. In fact, all of it has been taken from what I’ve learned from some of our best advisors. The perspective I bring is merely a young person’s point of view of how Gen X/Y will change our industry, and how you can use some of these best practices to prepare for the future of your firm.

At the end of March, I am leaving SEI (Yes, you read that right) to join a financial advisory firm. All of the many discussions I had with many of you also inspired me to pursue this next chapter of my career. I intend on applying much of what I’ve learned from all of you to become a successful financial planner in my own right and to help this firm build an even stronger business.

So as I close out my time here at SEI, I hope to leverage my experiences with many advisors to bring you my final thoughts on how to build a long-lasting and successful business that can endure through all the generations to come.

Technology is your friend not your foe

For many advisors, technology is a necessary evil. To be fair, our industry hasn’t made it all that easy for you, with the proliferation of technology innovations, continuing mergers and acquisitions of software companies, and seemingly siloed systems that you have to integrate together yourself. Nearly all advisors (even the ones who I consider to be technically-savvy) always state that they think they could be doing more from a technology standpoint. Yet, for young investors and young people coming into your practice, technology is essential. They will not be attracted to an old school, paper-based office. It’s a leveler that enables a young employee to be the reverse-mentor to the firm and is essential for interacting with younger clients. So since technology is going to continue to be a key driver in attracting both young advisors and young investors to your business, what’s an advisor to do?

Our best advisors don’t look at technology as merely just a means to an end, but as a strategic tool. Rather than assessing what technology they need or how to better use the technology they already have, they look first at what their strategic goals are for the business and how this technology will enable those goals. They look at their operations and ask themselves how technology can enable and streamline the current processes that they have today to help them achieve those business objectives. These goals range from wanting to work four days a week (rather than five) to wanting the ability to increase the number of clients they can serve without adding staff. And so, instead of consuming technology, trying to figure out where it fits into their processes and when to use it. They breakdown their operations into step-by-step workflows and identify steps where the technology can enable and improve a task. For example, if collecting information from prospects during the discovery process is a burdensome and lengthy task, then they find a technology that streamlines that data gathering task in their workflow.

Embrace succession

I have found that succession planning is a topic that many advisors avoid for two primary reasons. For one, it’s a huge undertaking to put a succession plan in place. For most advisors, we’re talking about a multiyear process with tons of parties and opinions involved. Secondly, it’s a hard pill to swallow for a small business owner. Most of you built your business and book up yourselves, so the thought of taking yourself out of the business can be a scary one. Unfortunately, this is going to be a key barrier to overcome if you ever want to attract and retain a young advisor or work with a young investor as a client. A young advisor will likely leave and take some of your clients with them if they don’t think you’re serious about putting a succession plan in place that allows for long-term career development. A young investor will not want to work with your firm if they don’t feel that you’re going to be able to serve them long into their old age.

Firms I have worked with who have gotten ahead of this issue have done two key things. First of all, they make a concerted effort to always have young advisors on staff. Often these firms implement a team structure to service their clients, where each client has both an older and younger advisor to work with. It enables the lead advisor to see the young advisor in action so that they can determine if he/she is partnership material. It also helps to offset any client concerns regarding your ability to help them not only plan toward their future retirement years, but also see it through its implementation. The second thing these firms do is have serious discussions with all their employees regarding succession planning often and early. They don’t wait until they’ve almost reached retirement age and leave the rest of their team waiting and wondering. They’re upfront and transparent with everyone (even those employees who are not on a partnership track) about what their intent is and eventually what their plan is.

Put planning first… investments second

I was just consulting with a young advisor who is a CFA taking over his father’s business. Rather than focusing on how he’ll take over the current investment processes and portfolios to add value to the firm, he’s hyper-focused on how he can implement financial planning software for the first time at the firm. Many young advisors coming into the industry, even those who studied investments, are all too aware of the commoditization of investments with the rise of passive investments as well as the automation of investment advice through robo-advisors. For the new age of advisors, they realize that financial planning must become a core part of your value proposition. This concept is further substantiated when you consider working with younger investors, as they won’t have a ton of investable assets or much of their assets will be tied up in their 401(k)s. Don’t get me wrong – Investment advice is still one of the reasons why a young investor would want to work with you, but it’s not going to be the primary reason why they work with you. Most of the time the key trigger for why they seek out advice is because a big life event has occurred and they need financial planning advice.

Bottom line: financial planning is where the industry is going these days. You will want to put your younger clients through a planning process first, rather than selling product, investments or performance right off the bat. You can actually leverage the younger advisors within your firm to deliver financial planning to your clients. They’re most likely already focused on planning as a key value-add service, and they can better relate with your younger clients and employ some of the new approaches to planning that we’re seeing in the industry, such as modular planning, co-planning, etc.

For the advisors I have worked with who have done this well, they tend to spend a lot of time refining their value proposition statement and then use that to define how they talk about themselves and market their work. Their value proposition clearly defines three things:

What type of client they typically work with

What their obstacles are

How the advisor helps the client overcome those hurdles

This takes the focus away from pure investment advice and enables you to put planning first in all your conversations and marketing.

Don’t fear the fiduciary rule—capitalize it

We all observed the crazy frenzy surrounding the DOL fiduciary rule. No one knows what will become of this rule, but being a fiduciary will continue to be a key focus in our industry. “Fiduciary” is a word that many of our advisors have even observed their own clients using. They post the question: “Are you a fiduciary?” without knowing truly what the word means. The reality is that many advisors are, in fact, fiduciaries already. The key is taking this opportunity to embrace the word and use it as a mechanism to market your firm. This will be important to the next generation of investors as well as young advisors evaluating whether they’d want to work at your firm. Young people will want to see that your firm emulates the true meaning of fiduciary, which is transparency and fees tied to value. Planning is certainly a part of this, because it will be hard to demonstrate that you’re a fiduciary without having the planning process to prove that you truly know your clients’ needs and goals in making your recommendations. Additionally, young advisors will naturally align to your firm’s focus on always being a fiduciary, because they’ll be in tune with what the next generation (their peers) want. Use that to your advantage.

Many of our top advisors created opportunity out of this fiduciary frenzy by bringing the word fiduciary to the forefront of how they market and talk about themselves. Some of them have done simple things like adding a fiduciary pledge to the bottom of their website or their email signature. Some of them have gone so far as to proactively point out in client meetings or client communications that they’re a fiduciary to get ahead of their clients asking the question themselves. Finally, fees were another way that advisors got out ahead of the fiduciary concerns. They create transparency about how they are paid by doing things like posting their fee structure on their website.

My parting words

Of all the insights I have shared with you over the years and all the blogs I have written, they all have been directly inspired by the conversations I’ve had with advisors like you. My hope was to summarize some of the most meaningful conclusions I’ve drawn out of those conversations to help enable you to build long, sustaining, enduring businesses that successfully capture the next generation of advisors and investors to become what I call a “next generation advisor.”

I have had an amazing journey working with lots of advisors and bringing to them a Gen X/Y point-of-view….And in an industry where I’m typically the youngest person in the room, I am so grateful for the way you all have listened. However, ultimately I have also been inspired by all the stories and insights that you have shared with me – About what it truly means to be a financial advisor. No matter what outsiders say, we all know that it is so much more than just taking the rich and making them richer. It’s about focusing on the client and the desire to help others through some of the most important decisions of their lives. You’re entrepreneurs building businesses and deep client relationships from nothing. I am excited to take on a fulfilling career that enables me to do all of those things.

I am now taking on the next part of this journey to become one of you – To become a financial advisor. Thank you for all your guidance and insights over the years! And if you want to follow the metamorphosis of a young product person into a financial advisor, continue to follow me on LinkedIn.